Five top picks for buy-to-let investors in Gauteng

Private Property South Africa

Tahir Desai •
Apr 21, 2015

Although the latest data available from StatsSA puts the current rate of rental inflation at just 5,05%, there are several pockets of high demand in Gauteng where rentals are rising faster than this – and landlords are making better-than-average returns at the moment.

“This may explain the current rise in the volume of buy-to-let property purchases noted in the latest FNB Property Barometer,” says Tony Clarke, “as well as the first-quarter improvement in the FNB Buy-To-Let Confidence Indicator, which suggests that the actual percentage of property purchases made by buy-to-let investors could break into double digits this year.”

Factors that may well contribute to the agent confidence expressed in the FNB survey, Clarke explains, are the proposed 22% increase in electricity tariffs, steadily rising fuel prices and winter food price increases, all of which are likely to drive up inflation and force the Reserve Bank to raise interest rates.

“At that stage, there will obviously be more demand for rental properties generally as fewer people will be able to afford their own homes, and there will be more interest on the part of investors.”

But for now, those areas where there are other factors driving unusually high rental demand – and rentals – are where buy-to-let investors should be focusing their interest. In Gauteng, these include:

Braamfontein, Auckland Park and other suburbs close to the University of the Witwatersrand and the University of Johannesburg.

Most private property investors know that accommodation in the “education belts” around SA’s major universities and colleges is at a premium and that there are excellent returns to be made if one can acquire student flats or houses at the right price.

Current prices for studio and one bedroom apartments in Braamfontein close to Wits range from around R320 000 all the way up to about R600 000 and one might even be able to acquire a two bedroom unit in an older building in that range. Current rentals start at around R4000 a month for bachelor units.

In Auckland Park, prices for studio and one-bedroom flats start at around R420 000, and monthly rentals start at R4000.

The best time to buy student units in areas like this is mid-year, and investors buying sectional title units also need to allow for levies.

These areas are now not only popular with students but also with career singles and working couples because of their proximity to the Pretoria Gautrain terminus.

In Hatfield, bachelor and one bedroom apartments cost between R600 000 and R850 000, depending on age, proximity to the UP campus, parking and facilities in the complex. Rentals for bachelor units start at around R5000 a month.

In Arcadia, prices for bachelor and one bedroom flats are much lower, ranging between R200 000 and about R440 000, but rentals are also lower, starting at around R3000 a month.

As office and retail development in Sandton continues apace, the demand for apartment accommodation keeps growing, and it has been estimated that there will be a shortage of more than 5000 rental units in the area within the next five years.

However, it is unlikely that this will be met, due to the lack of available land for such development in the CBD, and that bodes extremely well for rental demand in neighbouring suburbs, the nearest being Rivonia.

In fact, this has already been earmarked as Johannesburg’s next high-density flatland, and is already being targeted by apartment developers, with the result that there is currently quite a choice of stock for buy-to-let investors. The area also has the advantage of established infrastructure and of being on the Gautrain bus route to the centre of Sandton.

Brand-new one-bedroom apartments here are available at prices from R870 000, while prices for two bedroom apartments start at around R1 million. Monthly rentals start at R6000 for one bedroom units and R7800 for two bedroom units.

Thanks to the presence of a Gautrain station and excellent shopping, sporting and recreation facilities within easy reach, rental apartments in these areas are now always in high demand among young people who study and work locally and in Pretoria and Midrand.

And it is relatively affordable for private investors, with one bedroom apartments close to the station available at prices from around R400 000 and two-bedroom apartments available at prices from just under R600 000. There are several new developments under way and prices in these are only slightly higher. Rentals for two-bedroom apartments generally start at around R6200 a month.

Bronkhorstspruit/ Kungwini, on the border of Gauteng and Mpumalanga and 20km from Eskom’s new Kusile power station.

There is already huge demand for affordable rental accommodation in the town and more will be needed once the power station is complete.

Two bedroom apartments currently sell here for between R520 000 and R650 000, and rentals for these units start at about R5000 a month.

Buy-to-let investment in residential property is indeed on the increase, according to figures from the Rawson Property Group's sale franchises.
"The number of buyers now buying for investment purposes has almost doubled in ...